Urban[ism] Legend: The Free Market Can’t Provide Affordable Housing

Over at Greater Greater Washington, Ms. Cheryl Cort attempts to temper expectations of what she calls the “libertarian view (a more right-leaning view in our region)” on affordable housing.  It is certainly reassuring to see the cosmopolitan left and the pro-market right begin to warm to the benefits of liberalization of land-use.  Land-use is one area the “right,” in it’s fear of change, has failed to embrace a widespread pro-market stance.  Meanwhile, many urban-dwellers who consider themselves on the “left” unknowingly display an anti-outsider mentality typically attributed to the right’s stance on immigration.  Unfortunately, in failing to grasp the enormity of the bipartisan-caused distortion of the housing market, Ms. Cort resigns to advocate solutions that fail to deliver widespread housing affordability.

Yes, adding more housing must absolutely be a part of the strategy to make housing more affordable. And zoning changes to allow people to build taller and more usable space near transit, rent out carriage houses, and avoid expensive and often-unnecessary parking are all steps in the right direction. But some proponents go on to say relaxing zoning will solve the problem all on its own. It won’t.

Well, if “relaxing” zoning is the solution at hand, she may be right – relaxing will only help a tad…  While keenly aware of the high prices many are willing to pay, Cort does not seem to grasp the incredible degree to which development is inhibited by zoning.  “Relaxing” won’t do the trick in a city where prices are high enough to justify skyscrapers with four to ten times the density currently allowed.  When considering a supply cap that only allows a fraction of what the market demands, one can not reasonably conclude “Unlimited FAR” (building density) would merely result in a bit more development here and there. A radically liberalized land-use regime would deliver numbers of units several times what is permitted under current regulation.

Ms. Cort correctly concludes that because of today’s construction costs, new construction would not provide housing at prices affordable to low income people.  This will certainly be the case in the most expensive areas where developers would be allowed to meet market demands by building 60 story skyscrapers.  Advocates of land-use liberalization who understand the costs of construction would not claim that dense new construction will house the poor.  But if enough supply is allowed to come to market today, today’s new construction will become tomorrow’s affordable housing.  And this brings us to the more meaningful discussion: filtering.  Here’s where Ms. Cort’s analysis completely falls apart.

It is true that increasing supply eases upward pressure on all prices. But the reservoir of naturally cheaper, older buildings runs out after a while.

Tragically, Ms. Cort is using the current radically supply-constrained paradigm to analyze a free-market counter-factual.  If development at levels several times the current rate were allowed over the past few cycles, the reservoir of cheaper, older buildings would have remained plentiful and affordable.  If the market were allowed to meet demand for high-end units in the form of dense new construction, there would be little or no market pressure for unsubsidized market-rate units to be converted into luxury units.  The 1400 Block of W Street NW example she gives would almost certainly still be affordable.

On a larger scale, the increased supply of housing in the area helps absorb demand for more housing, but it’s not enough to stem the demand for such a sought-after location. Between 2005 and 2011, the rental housing market’s growth added more than 12,500 units. But at the same time, $800/month apartments fell by half, while $1000/month rentals nearly doubled. Strong market demand will shrink the availability of low-priced units. That’s what has happened over the last decade as DC transformed from a declining city into a rapidly growing one.

But, 12,500 units is the amount of supply added under the current over-regulated regime.  This amount of development is minuscule in a large city. (see diagram below)  What if DC allowed as much supply growth as Austin or Miami?  The 12,500 figure would triple.  Further, since Austin and Miami are far from free-market, the development rate in a truly free-market DC would certainly exceed a tripling.  If you consider the amount of supply that would have been added over the last several decades in an unlimited FAR DC, Ms. Cort’s position starts to sound quaint.  Conservatively assuming 50-100,000 units of rental housing would have been developed over the last few decades of DC’s growth, rents certainly would not have doubled.  I’ll go out on a limb and estimate that average rent growth would be close to inflation.

Chart by the Citizens Budget Commission (via NYYIMBY)

Chart by the Citizens Budget Commission (via NYYIMBY)

Ms. Cort wants housing to be less than 30% of gross income for nearly all residents.  Will the market provide new housing affordable to minimum wage earners at the most expensive intersection in Georgetown?  Probably not, and I hope she isn’t setting the bar that high.  While nobody is wise enough to know whether a free-market in land use would accomplish this, a free-market DC could be affordable to 50-100,000 more people than the zoned-to-death DC of today.  Will stock of units deemed affordable to low wage earners be of the quality, location, and size acceptable to Cort?  The necessity for further intervention is a subjective preference.

While acknowledging the validity of liberalization in her critique of supply-and-demand denialism, Cort’s conclusion fails to look at supply and demand wholistically:

Supply matters, but it’s not the whole story

Wrong. Supply really must be part of the whole story.  A city is only affordable to the number of residents it houses affordably.  Failure to recognize this only shifts the burden from one demographic to another. (and it won’t be the rich who pays the price)  If a zoning-plagued city fails to provide 1,000 units demanded, 1,000 people can no longer afford to live there.  Even if that city chose to subsidize housing for 2,000 people at 50-80% of AMI, that doesn’t change the fact that 1,000 people who wanted to live in that city must leave.  Any viable solution (free-market or otherwise) must involve increasing supply significantly, either through creating supply directly or subsidizing demand through vouchers, which induces new development.  But, this simply can’t happen if overall supply is capped through zoning.

Transpo bill gridlock staves off federal transit regulation

There are two general attitudes among urbanists towards the transportation omnibus bill that Congress has been struggling to pass in recent years (?). Some, like Streetsblogs and a number of political advocacy groups, hope for swift passage because of the bill’s transit spending. Others, like Cap’n Transit, balk at all the highway spending, and cheer on the gridlock.

And here’s one other reason to be on Cap’n Transit’s side: no new bill means no federal regulation of rapid transit.

Right now, the federal government only has the power to regulate safety on rail lines that feed into the national mainline network, and could therefore, at least in theory, run into a freight train. This includes all intercity trains (Amtrak and possibly All Aboard Florida), commuter trains (Metro-North, Caltrain, etc.), and the occasional light rail line using an older right-of-way that’s still connected to the national network (e.g., New Jersey’s River Line). Self-contained “rapid transit” networks – subways, elevated trains, and new light rail and streetcar lines – are beyond the feds’ reach.

To many legislators, the Fort Totten crash on DC’s Red Line in 2009, operated by WMATA, was evidence that federal regulation is needed. (WMATA’s MetroRail is actually one of the most technologically advanced systems in America – or at least it was, until after the crash when they turned the ATO off, which drives the train while the operator opens and closes the doors.) There was a big outcry about it right after the crash and a few times since then, and the debate seems to be coming up again.

But despite the liberal leanings of most transit enthusiasts, you’d be hard pressed to find one who thinks that federal regulation will do WMATA – an admittedly heinous agency that needs to be reined in – any good. The main reason to be suspicious is the incredibly poor job that the Federal Railroad Administration (FRA) has done in overseeing mainline rail safety, which has been in its regulatory portfolio for decades.

In the words of Eric McCaughrin, the FRA is “regulating passenger rail out of existence” with its insistence that trains be bulked up to survive crashes. Instead, he suggests that instead safety regulators should focus on preventing crashes with technology like they do in Europe and Asia – for example by installing automatic train protection and operation systems, which, at least outside of DC, have very good safety records. The FRA’s idea of safety, he contends, drives up costs, power consumption, and track wear-and-tear, while driving down reliability and performance (namely, acceleration and deceleration).

The FRA (or whatever body would be charged with the new regulatory tasks) may not make exactly the same mistakes with subways as they did with mainline trains, but many are fearful that they’ll screw up in some other way, such as not keeping up with future technological advances.

Democrats are likely to follow the president’s lead on the matter, who proposed expanding federal oversight to rapid transit and light rail back in 2009. Most Republicans are against giving more regulatory authority on this matter to the feds, though their opposition seems to be based in ideology. I would love to be proven wrong, but I doubt any of them are actually aware of the FRA’s regulatory misdeeds.

In any case, the issue is tied up with the larger highway bill which is of course mired in its own controversies. So luckily for those leery of federal oversight in this matter, Politico says we probably won’t see the feds regulating rapid transit this year:

But with House and Senate negotiators still far apart on the bill, many are predicting another extension of current policy. That would mean no changes in the transit safety structure.

I do have to take issue with Politico’s headline, though: “Transit safety still lags.” It’s not safety that lags – in fact, rapid transit has an impecable safety record, even taking into account the deaths at the hands of the the fools at WMATA. Rather, it’s federal regulation over safety that’s lagging. The Democrats argue that the two are the same thing, but most Republicans and transit advocates clearly don’t see it that way.

Montgomery County’s loss is Calgary’s gain: Rollin Stanley escapes from the coven to Canada

Not sure how this escaped me, but it seems that a few weeks ago, Rollin Stanley was announced as Calgary’s new chief planner. Rollin Stanley, you’ll recall, was the very vocal pro-urban growth planner in Maryland’s Montgomery County, north of Washington, DC, who resigned after these four sentences appeared in Bethesda Magazine:

He has little patience with dissenters. Stanley goes so far as to accuse them of being “rich, white women…spreading fear.” He says they stalk his appearances before community groups, sowing discord. He claims they refer to themselves as “the coven.”

Most Americans still don’t think of Calgary as a very urban place, but it’s been holding its own against Vancouver and Toronto lately when it comes to urbanism in Canada (which is generally much more advanced than urbanism in the US), even without true rapid transit (the C-Train, while impressive as light rail, still has to cross streets). Calgary’s skyline’s been booming, and as the Calgary Herald writes, the city also has an urbanist mayor:

Stanley’s approach somewhat resembles that of Mayor Naheed Nenshi, and beyond his unconventionally frank yet also high-reaching rhetoric. Nenshi, too, deplores suburban sprawl and the financial challenges it brings for government, and praises more walkable districts and transit.

While Nenshi avidly uses social-media site Twitter, Stanley blogs prolifically with long rhapsodies on everything from master plans and neighbourhood walkabouts to census data and criticism.

Here’s his old Montgomery County blog – does anyone know if he’s keeping one in Calgary? Or if maybe we could lure him to Twitter?

There appears to be a general political consensus – that thing Alon Levy’s always talking about – towards urbanism in Calgary, so Calgary will likely get good urbanism:

While the developer sector in Calgary is well-organized, there’s not as professionalized and unified community movement against smart growth principles here, although Watson had warned as he left about community resistance to the coming changes.

In fact, Stanley has showered praise on Calgarians’ support in helping shape the Plan It and Imagine Calgary long-range blueprints.

“That is not something that happens in a lot of places because it cannot happen in a lot of places, so instantly that tells you something,” he said in a brief interview after being announced as planning GM on April 23, the provincial election day.

Anyway, the whole Calgary Herald article is great. But if you don’t have time to read it, here’s another interesting bit about his relationships with private developers in Maryland, and how those in Calgary perceive him:

The Ontario-born Stanley’s outspokenness has caught the attention of the development industry here, curious about the successor to David Watson, the general manager of planning who retired last month.

“We have this sprawling landscape, and it’s what people want. So how do you not provide what people want?” asked Shane Wenzel, president of Shane Homes, which is building in new communities in all four Calgary quadrants.

“You’ve got to hold out some hope that Rollin’s at least open to conversation and what’s been written about in the past is maybe taken out of context. Maybe he’s never really experienced a place like Calgary to this point.”

There may be little choice in the matter, with years’ worth of land already planned for new suburbs and more in the hopper – though their density creeps ever upwards with fewer single-family homes.

Stanley got along just fine with the development industry in Montgomery, who shared his desire to maximize their land’s value by building up and building attractive.

“I was really sad and I think most of the business community was really saddened when he left because he’s a strong advocate for smart growth and developing our spaces in an urban way,” said Evan Goldman of Federal Realty, one of the companies behind White Flint.

It looks like Shane Homes is a suburban, greenfield, single-family builder – it’d be interesting to see how the land owners and developers downtown feel. The article also notes that the Canadian prairie city “is still building anew on almost all its fringes.”

A nice compromise would be for Rollin Stanley’s planning department to continue to allow continued sprawl, while at the same time trying to counteract it by liberalizing infill growth. With the exception of maybe Chicago, it would be the first city to allow density without at the same time restricting sprawl.

Again, the Calgary Herald article.

Five union work rules that harm transit productivity

Since Alon’s comment a few weeks ago that union work rules, not wages and benefits, are the real problem with labor unions at America’s transit authorities, I’ve been looking into the matter, which seems to be something that a lot of transit boosters don’t like to talk about. It’s an uncomfortable subject for two reason: 1) urban planners and unions have an ideological affinity, and 2) it’s hard to lobby for increased subsidies for transit when you admit that you’re making poor use of the money you already have.

But despite planners’ reticence to talk about the problem, it needs to be addressed. Throwing money around is what governments do best, and while it might be an easy solution to problems in the short run, the money is running out. Some will surely quibble that we can afford to raise taxes and do more deficit spending, especially for something as vital as transit, but whether or not that’s true, the fact is that voters are increasingly doubting that it is, and so politicians are going to become stingier about doling out money for transit.

transit worker

Anyway, the most obvious area for savings is in actual wages and benefits, but many mainstream conservative and libertarian publications have written a lot about this issue, so I want to focus on just inefficient work rules. These are rules that are written into union contracts hashed out in a political process, and management doesn’t have the authority to overturn them. I found surprisingly little on the issue in the academic literature, but there’s plenty on it in newspapers, and so here’s a round-up of the major issues that I found with various American transit unions. The list is by no means comprehensive – either of all the cities that have these problems, or even of the different types of problems – and I encourage people to share any knowledge they have on the subject in the comments. (I’m also interested in something that I suspect Alon may know a thing or two about – international comparisons. Do the notoriously union-happy French have these same rules?)

So, without further ado…

1. Mandatory eight-hour workdays and no part-time hiring. This one may surprise some since the eight-hour workday is one of organized labor’s most prized achievements, and indeed it works out well with most workers. But transit isn’t “most work,” and trying to force an eight-hour workday on it is problematic. Transit service has huge peaks during the morning and evening rush hours, so when transit agencies are forced to schedule workers for eight-hour shifts (or longer with overtime), some people end up sitting around doing nothing for part of each day. With train and bus operators, this leads to them doing nothing during the middle of the day when there aren’t as many routes to run. (At San Francisco’s Muni, there are apparently six divisions where drivers spend more time waiting for assignments than they do actually working.) With maintenance workers, it means people being scheduled for work during at least one rush hour per shift, during which they don’t have access to tracks and can’t really work. And of course management often isn’t allowed to hire part-time workers to solve this problem. [Berkeley Planning Journal, SF Bay Guardian, SF Weekly, NY Daily News, City Journal]

2. Seniority. Unions are run on seniority, and people who have been with the union longer often get to pick what work they do. A commenter from Portland explains:

Here in Portland, being a train operator (MAX or Streetcar – WES is staffed by employees of the shortline railroad on whose tracks the service run, not by TriMet employees) is considered a “senior” position; one that bus drivers with seniority may aspire for. Given that operation of trains is a different set of skills than operation of a bus – does this state of affairs make sense? By the same token, it’s frequently the case that experienced bus drivers (with lots of seniority) get to choose the easiest assignments – and frequently will pick suburban social-service routes; leaving the inexperienced drivers to haul crushloaded inner-city busses through rush hour traffic. Easier work assignments are frequently considered a “perk” of seniority. In the (nonunion) private sector one frequently observes the reverse – more experience and skill (and more pay) implies more difficult assignments. [Market Urbanism comment]

And then of course there are the infamous problems with escalator repair in DC’s Metrorail stations, which according to Unsuck DC Metro’s threepart series, are also the result of a seniority system. The “pick” system lets the most experienced employees choose which escalators they work on (or at least the general area), and they often pick the stations whose escalators are in least need of repair, leaving the really bad escalators to the less-experienced workers.

3. Tons of time off and little-to-no advanced notice required. Here’s someone who claims to be an operator with Muni, San Francisco’s public transit authority, who’s actually defending Muni workers’ sick day allowances:

I wonder where the one shift in six missed numbers come from. I am a Muni operator, and I certainly don’t miss that much time. I don’t have enough sick or vacation hours! I also wonder if that includes training/retraining time. The absenteeism rates are higher than for office workers, but there are some crucial reasons. As my wife (a high school teacher) pointed out, if she goes to work with a cold, she can still function. She can give her students desk work and try to relax a bit. If I work with a cold, an unexpected sneeze can kill someone. Working in transit ops requires full attention every second you’re moving. There isn’t an opportunity to zone out, massage your temples, take a coffee break. So our sick policies are a little looser than office workers are. How loose? I can call in sick three times a quarter (Jan-March, Apr-Jun, July-Sept, Oct-Dec), up to five days at a time, for a total of ten days a quarter without consequences. Mind you, I don’t have forty days of sick time a year! If I go over any of those limits, then I have to have doctor’s notes clearing me to come back to work and I can’t work any RDO (regular day off overtime). I have never been on the sick abuse list, and most of the operators I know who have been were there because of some family emergency.

We are expected to show up for work. All this reminds me of the miss-out kerfluffle from several years ago. (Muni operators don’t have to call in – they just don’t show up!) What the public wasn’t told was that I could (and still can) be charged with a miss-out if I am one minute late to work! I start today at 11:43 am. If I’m there at 11:44…

In addition to the unusually large amount of sick days, the way that the work rules handle operators missing work is problematic. Because workers don’t even have to notify management when they’re sick, the run is often delayed, and when someone is finally called in to do the job, they have to be paid overtime to do it. [Streetsblog SF]

4. Cross-utilization of labor not allowed. Some of the aforementioned problems (especially the constraints of the eight-hour work day) could be mitigated if workers were allowed to do other tasks, even menial ones, when they’re not needed with their primary job, but union contracts generally disallow this. Drivers can’t take tickets or work in information booths while they’re not driving, and maintenance workers can’t do either of those things or operate trains when they’re not able to work on the tracks. [Berkeley Planning Journal]

5. Overtime abuse. Overtime is already given out very liberally to unionized transit employees compared to private sector jobs, but one trick that they use at Muni to “monetize” their overtime is to call in sick on a day you’re scheduled and then work a day you’re not scheduled, for overtime pay, which you get even though you haven’t worked 40 hours that week. In the case of DC’s Metro employees, pensions are calculated based on the highest four years of income, which gives workers incentives to wrack up tons of overtime in order to boost their (already very generous) pensions. [SF Weekly, GGW]

…so, there you have it. Are there any work rules that I missed? How common are these rules – did I just find some isolated instances, or is this a deep, systemic problem?

Links: “At least they’re being honest” edition

1. NY Governor Cuomo promises the “most aggressive” strengthening of the state’s (read: NYC’s) rent laws.

2. Bronx <3 parking: “This community wants a moratorium on any more building until we get a parking lot.” “We don’t want any bigger buildings and we want parking space for everyone.”

3. Do people realize that “I don’t mind modernist architecture” and “All new buildings must have decorative cornices and intricate brickwork” are fundamentally incompatible statements?

4. Witold Rybczynski on density. Nothing you haven’t already heard a million times before, but, Witold Rybczynski!

5. DC’s zoning code finally allows building owners to enclose the once-encouraged outdoor arcades.

Links

1. The fact that we even have to have a debate over whether residential development should be allowed in Midtown, where new residents will have perhaps a smaller impact on transportation infrastucture than anywhere else in the country (they can either walk to work or do a reverse train commute), is pretty pathetic.

2. The plan for San Jose’s Diridion Station is is so loaded down with boondoggles and bad ideas that it’s hard to keep track of them all. As if a stadium and HSR station weren’t bad enough it’s also getting a neo-Euclidean zoning plan (business and R&D park to the north, entertainment, retail, and office space by the station, and residential and retail to the south), “adequate parking,” and what looks to me like probably too much parkland. One panelist from the Greenbelt Alliance said it was necessary for the plan to include “parks, trails and public plazas.” But given that it looks like we’re only really talking about an area that’s a dozen or two blocks in size, is all that really necessary?

3. Second Avenue Subway on Bloomberg’s transit failures. Looks like my bike lane rabble-rousing is spreading…

4. More union shenanigans: Unsuck DC Metro uncovers with a FOIA request $2.4 million paid out in the last five years “in grievance back pay for work never done.” Some of it is paid out in petty seniority squabbles, some in more reprehensible cases, including to people who have literally killed, assaulted, and stolen on the job. Also, if you’re interested in how exactly unions suck the lifeblood out of American mass transit, Unsuck’s threepart series on the DC Metro’s escalator problems is an excellent case study.

5. Highway interchange transit-oriented development. Not a joke. Courtesy of the Overhead Wire.

Annotated simplified DC land use map

Our friends at BeyondDC have made a nifty little simplified map of the DC zoning code (yellow is residential, red is commercial, gray is park/institutional/industrial) out of GIS data provided by the local government. It’s nice and all, but when you reduce such a beautifully complex and meticulous plan to a mere three colors, you lose all the local flavor that makes DC unique. So, I’ve taken the liberty of mining the GIS data and annotating the map a bit, in an attempt to better present the true spirit of The Zoning Code:

…I was tempted to put the “Fine. But only till the black people leave” in a big fat watermark over the entire city, but alas, I made it with Pixlr.

DC residents, feel free to leave additional annotations in the comments.